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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
PDT, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7408 Hollister Avenue, Santa Barbara, California 93117
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(Address of principal executive offices, including zip code)
(805) 685-9880
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JULY 31, 1997
----- ----------------------------
Common Stock, $.01 par value 12,335,879
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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PAGE
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets as of June 30, 1997 and
December 31, 1996...................................................3
Consolidated statements of operations for the three months ended
June 30, 1997 and 1996, and for the six months ended
June 30, 1997 and 1996..............................................4
Consolidated statements of cash flows for the six months ended
June 30, 1997 and 1996..............................................5
Notes to consolidated financial statements............................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................................7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................12
SIGNATURES ...........................................................13
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PDT, INC.
CONSOLIDATED BALANCE SHEETS
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<CAPTION>
June 30, December 31,
1997 1996
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(Unaudited)
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Assets
Current assets:
Cash and cash equivalents ..................... $ 17,570,000 $ 31,498,000
Investments in short term marketable securities 21,327,000 20,600,000
Accounts receivable ........................... 586,000 2,179,000
Prepaid expenses and other current assets ..... 780,000 390,000
--------------- ----------------
Total current assets ............................. 40,263,000 54,667,000
Property, plant & equipment:
Vehicles ...................................... 28,000 28,000
Furniture and fixtures ........................ 972,000 943,000
Equipment ..................................... 2,883,000 2,444,000
Leasehold improvements ........................ 1,190,000 1,072,000
Capital lease equipment ....................... 184,000 184,000
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5,257,000 4,671,000
Accumulated depreciation and amortization ..... 2,247,000 1,806,000
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3,010,000 2,865,000
Investment in affiliate .......................... 1,528,000 2,000,000
Patents and other assets ......................... 631,000 354,000
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Total assets ..................................... $ 45,432,000 $ 59,886,000
=============== ================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable .............................. $ 2,557,000 $ 2,716,000
Accrued payroll and expenses .................. 373,000 352,000
Current portion of long term obligations ...... 14,000 42,000
Current portion of capital lease obligations .. 35,000 38,000
--------------- ----------------
Total current liabilities ........................ 2,979,000 3,148,000
Capital lease obligations, less current portion .. 2,000 21,000
Shareholders' equity:
Common stock, 50,000,000 shares authorized;
12,296,886 and 12,337,876 shares
issued and outstanding at June 30, 1997 and
December 31, 1996, respectively .............. 105,252,000 108,974,000
Deferred compensation ......................... (983,000) (1,612,000)
Accumulated deficit ........................... (61,818,000) (50,645,000)
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Total shareholders' equity ....................... 42,451,000 56,717,000
--------------- ----------------
Total liabilities and shareholders'equity ........ $ 45,432,000 $ 59,886,000
=============== ================
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
PDT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
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Revenues:
Product sales .......................... $ -- $ 3,000 $ -- $ 4,000
Grants, licensing and royalty income ... 433,000 753,000 724,000 1,381,000
-------------- ------------- ------------- -------------
433,000 756,000 724,000 1,385,000
Costs and expenses:
Cost of goods sold ..................... -- 2,000 -- 4,000
Research and development ............... 4,364,000 3,384,000 8,230,000 8,050,000
Selling, general and administrative .... 2,006,000 (331,000) 4,270,000 2,507,000
Loss in investment in affiliate ........ 240,000 -- 472,000 --
-------------- ------------- ------------- -------------
Total costs and expenses .................. 6,610,000 3,055,000 12,972,000 10,561,000
Loss from operations ...................... (6,177,000) (2,299,000) (12,248,000) (9,176,000)
Interest income (expense):
Interest income ........................ 443,000 627,000 1,079,000 710,000
Interest expense ....................... (2,000) (10,000) (4,000) (18,000)
-------------- ------------- ------------- -------------
Total interest income (expense) ........... 441,000 617,000 1,075,000 692,000
Net loss .................................. $ (5,736,000) $ (1,682,000) $ 11,173,000) $ (8,484,000)
============== ============= ============= =============
Net loss per share ........................ $ (0.46) $ (0.14) $ (0.90) $ (0.76)
============== ============= ============= =============
Shares used in computing net loss per share 12,365,451 11,872,255 12,368,328 11,148,338
============== ============= ============= =============
See accompanying notes.
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<TABLE>
<CAPTION>
PDT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1997 1996
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Operating activities:
Net loss ...................................................... $ (11,173,000) $ (8,484,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization .............................. 450,000 252,000
Amortization of deferred compensation ...................... 611,000 1,608,000
Changes in operating assets and liabilities:
Accounts receivable ..................................... 1,593,000 (1,113,000)
Inventories ............................................. -- (5,000)
Prepaid expenses and other assets ....................... (676,000) (113,000)
Accounts payable and accrued payroll and expenses ....... (138,000) 363,000
-------------- -------------
Net cash used in operating activities ......................... (9,333,000) (7,492,000)
Investing activities:
Purchases of marketable securities ............................ (25,727,000) (123,599,000)
Sales of marketable securities ................................ 25,000,000 103,600,000
Investment in affiliate ....................................... 472,000 --
Purchases of property, plant and equipment .................... (586,000) (665,000)
-------------- -------------
Net cash used in investing activities ......................... (841,000) (20,664,000)
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs ... 612,000 66,017,000
Purchase of Common Stock ...................................... (4,316,000) --
Payments of capital lease obligations ......................... (22,000) (20,000)
Payments of long term obligations ............................. (28,000) (25,000)
-------------- -------------
Net cash provided by (used in) financing activities ........... (3,754,000) 65,972,000
Net increase (decrease) in cash and cash equivalents .......... (13,928,000) 37,816,000
Cash and cash equivalents at beginning of period .............. 31,498,000 8,886,000
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Cash and cash equivalents at end of period .................... $ 17,570,000 $ 46,702,000
============== =============
Supplemental disclosures:
State taxes paid .............................................. $ 80,000 $ 10,000
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Interest paid ................................................. $ 5,000 $ 18,000
============== =============
See accompanying notes.
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PDT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at June 30, 1997, and for the three and
six month periods ended June 30, 1997 and 1996, is unaudited. In the opinion of
management, the information reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature. Interim
results are not necessarily indicative of results for a full year. For a
presentation including all disclosures required by generally accepted accounting
principles, these financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1996
included in the PDT, Inc. Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
2. EMPLOYEE STOCK OWNERSHIP PLAN
On December 9, 1996, the Board of Directors approved the PDT, Inc. 401(k) -
Employee Stock Ownership Plan (the "ESOP") which provides substantially all
employees with the opportunity for long term benefits. The ESOP was implemented
by management on July 1, 1997 and operates on a calendar year basis. In
conjunction with the ESOP, PDT, Inc. (the "Company") registered with the
Securities and Exchange Commission 300,000 shares of the Company's Common Stock
for purchase by the ESOP. The ESOP provides for eligible employees to allocate
pre-tax deductions from payroll which are used to purchase the Company's Common
Stock on a bi-weekly basis. The ESOP also provides for a discretionary
contribution made by the Company based on the amounts contributed by the
participants. The amount to be contributed by the Company is determined by the
Board of Directors prior to the start of each plan year. Company contributions,
which can be made in cash or other property as determined by the Board of
Directors, will be made on a quarterly basis and vest over a five year period.
For the 1997 plan year, the Board of Directors has directed the Company to
contribute half of the amounts contributed by the participants.
3. PER SHARE DATA
Net loss per share is computed using the weighted average number of shares
outstanding during the periods, as adjusted pursuant to the rules of the
Securities and Exchange Commission for certain matters for which adjustments
would not be required to be presented under APB Opinion 15, for the periods
prior to the Company's public offerings.
In February 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE."
("SFAS No. 128") SFAS No. 128 specifies new standards designed to improve the
earnings per share ("EPS") information provided in financial statements by
simplifying the existing computational guidelines, revising the disclosure
requirements and increasing the comparability of EPS data on an international
basis. This statement also requires all prior periods to be restated to conform
with this new standard. Under the new requirements, primary and fully diluted
EPS will be replaced with basic and diluted EPS. Basic EPS excludes the dilutive
effect of common stock equivalents which were included in the primary EPS
calculation. Diluted EPS is essentially the same as fully diluted EPS amounts as
calculated under the principles currently used. Other changes consist of the
elimination of the modified treasury stock method and the three percent
materiality provision and the revision of the contingent share provision and the
supplemental EPS data requirements. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997. Neither the basic
nor diluted EPS are expected to differ materially from the current presentation
of EPS.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although PDT, Inc.
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved. The important factors that could
cause actual results to differ materially from those in the forward looking
statements herein include, without limitation, the early stage of development of
both the Company and its products, the timing and uncertainty of results of both
research and regulatory processes, the extensive government regulation
applicable to the Company's business, the unproven safety and efficacy of the
Company's drug and device products, the Company's significant additional
financing requirements, the uncertainty of future capital funding, the highly
competitive environment of the international pharmaceuticals and medical device
industries and the presence of a number of competitors with significantly
greater financial, technical and other resources and extensive operating
histories, the Company's potential exposure to product liability or recall,
uncertainties relating to patents and other intellectual property, including
whether the Company will obtain sufficient protection or competitive advantage
therefrom, and the Company's dependence upon a limited number of key personnel
and consultants and its significant reliance upon its collaborative partners for
achieving its goals, and other factors detailed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
GENERAL
Since its inception, the Company has been principally engaged in the
research and development of drugs and medical device products for use in
photodynamic therapy. The Company has been unprofitable since its founding and
has incurred a cumulative net loss of approximately $61.8 million as of June 30,
1997. The Company expects to continue to incur substantial and increasing
operating losses for the next several years due to continued and increased
spending on research and development programs, the funding of preclinical and
clinical testing and regulatory activities and the costs of manufacturing and
administrative activities.
The Company's revenues primarily reflect income earned from licensing
agreements, contracts, grants and device product sales. Product sales represent
limited sales of photodynamic therapy devices (e.g., light producing devices and
light delivery and measurement devices), sold both domestically and
internationally, to researchers and an OEM distributor. To date, the Company has
received no revenue from the sale of drug products, and the Company is not
permitted to engage in commercial sales of drugs or devices until such time, if
ever, as the Company receives requisite regulatory approvals. As a result, the
Company does not expect to record significant product sales until such approvals
are received.
Until it commercializes its product(s), the Company expects revenues to
continue to be attributable to licensing agreements, contracts, grants and
device product sales for research use. The Company anticipates that future
revenues and results of operations may continue to fluctuate significantly
depending on, among other factors, the timing and outcome of applications for
regulatory approvals, the Company's ability to successfully manufacture, market
and distribute its drug and device products and/or the establishment of
collaborative arrangements for the manufacturing, marketing and distribution of
some of its products. The Company anticipates its operating activities will
result in substantial net losses for several more years.
The Company is conducting Phase II/III clinical trials for two indications
in the oncology area and one indication in dermatology; is conducting a Phase
I/II clinical trial in ophthalmology, is preparing to initiate additional Phase
I/II clinical trials in the urology, oncology and dermatology areas; and is
conducting preclinical studies in oncology, ophthalmology, urology, dermatology,
gynecology and cardiology.
The Company has awarded stock options that vest upon the achievement of
certain milestones. Under Accounting Principles Board Opinion No. 25, such
options are accounted for as variable stock options. As such, until the
milestone is achieved (but only after it is determined to be probable), deferred
compensation is recorded in an amount equal to the difference between the fair
market value of the Common Stock on the date of determination less the option
exercise price and is adjusted from period to period to reflect changes in the
market value of the Common Stock. Deferred compensation, as it relates to a
particular milestone, is amortized over the period between when achievement of
the milestone becomes probable and when the milestone is estimated to be
achieved. Amortization of deferred compensation could result in significant
additional stock compensation expense being recorded in future periods based on
the market value of the Common Stock from period to period.
Effective June 21, 1996, the Compensation Committee of the Board of
Directors adjusted the future vesting periods of the variable stock options
covering 400,000 shares of Common Stock. These variable stock options were
adjusted to change the vesting periods to specific dates as opposed to the
original vesting periods which were based upon the achievement of milestones; no
change was made to the exercise prices of these variable stock options. This
change in the vesting periods provides for the options to be accounted for as
non-variable stock options and therefore alleviates the impact of deferred
compensation expense fluctuation in future periods based on the changes in the
per share market value from period to period. As of June 30, 1997, options
covering 227,500 shares with an exercise price of $34.75 per share have vested
and 100,000 shares are expected to vest during the remainder of 1997. The
remaining unvested shares will vest in the years 1998 through 2000.
RESULTS OF OPERATIONS
The following table provides a summary of the Company's revenues for the
three and six months ended June 30, 1997 and 1996:
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THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
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<S> <C> <C> <C> <C>
CONSOLIDATED REVENUES
- ---------------------
Product sales $ -- $ 3,000 $ -- $ 4,000
Grants and contracts -- -- -- 256,000
Royalties 58,000 4,000 124,000 4,000
License 375,000 749,000 600,000 1,121,000
------------- ------------- ------------- -------------
Total revenue.......... $ 433,000 $ 756,000 $ 724,000 $ 1,385,000
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REVENUES. For the three months ended June 30, 1997, revenues decreased to
$433,000 from $756,000 for the three months ended June 30, 1996. Total revenues
for the six months ended June 30, 1997 decreased to $724,000 from $1.4 million
in the first six months of 1996. The decrease in revenues for the three and six
month periods ended June 30, 1997 as compared to the same periods in 1996
relates primarily to the decrease in license revenues related to the billing for
the reimbursement of clinical costs in conjunction with the license agreement
entered into in July 1995 with Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn").
Additionally, the decrease in revenues for the six months ended June 30, 1997 is
due to a reduction in grant income which decreased from $256,000 for the six
months ended June 30, 1996 to no grant income for the six months ended June 30,
1997. The decrease in license revenue and grant income for the three and six
month periods ended in 1997 was offset by an increase in royalty income earned
from a license agreement entered into in 1992 with Laserscope which provides
royalties from the sale of the Company's previously designed device products.
The Company anticipates recording license income for the reimbursement of
clinical costs throughout 1997 and beyond and expects to continue to receive
royalties and grant income in the future. The level of such license, grant and
royalty income may fluctuate materially in the future depending on the amount of
clinical costs incurred and/or reimbursed under the Pharmacia & Upjohn
Agreement, the amount of grant income awarded and expended and the amount of
device products sold. In 1996 and continuing through 1997, the Company decreased
its custom device order activities so as to direct its resources toward device
production in support of its clinical trials and drug product development, which
resulted in decreased device product sales.
COST OF GOODS SOLD. Cost of goods sold for the three months ended June 30,
1997 and 1996 was considered insignficant. These minimal amounts are reflective
of the Company's decrease in custom device order activity due to its decision to
allocate its manufacturing resources to support its preclinical and clinical
testing. The Company expects gross margins to be insignificant until the Company
commences commercial sales of its products.
RESEARCH AND DEVELOPMENT. The Company's research and development expenses
for the three months ended June 30, 1997 increased to $4.4 million from $3.4
million for the three months ended June 30, 1996. Research and development
expenses for the six months ended June 30, 1997 increased to $8.2 million from
$8.1 million for the six months ended June 30, 1996. The increase for the three
months ended June 30, 1997 compared to the same period in 1996 was primarily due
to an adjustment of $1.0 million in deferred compensation expense recorded in
the three months ended June 30, 1996. The adjustment was related to the
accounting treatment associated with the decline in the per share market value
of variable stock options, as well as the changing of the vesting periods of
these variable stock options. After adjusting for the $1.0 million decrease in
deferred compensation for the three months ended June 30, 1996, research and
development expenses for the three and six month periods ended June 30, 1997 are
comparable to the expenses incurred in the three and six month periods ended
June 30, 1996. While the research and development expenses have remained
comparable for the above periods, the Company anticipates future research and
development expenses to increase as the Company expands its research and
development programs which include the increased hiring of personnel and
continued expansion of preclinical and clinical testing. See "--General."
SELLING, GENERAL AND ADMINISTRATIVE. The Company's selling, general and
administrative expenses for the three months ended June 30, 1997 increased by
$2.3 million from the comparable period of the prior year. Total selling,
general and administrative expenses for the first six months of 1997 increased
to $4.3 million from $2.5 million for the first six months of 1996. The increase
in selling, general and administrative expenses for the three months ended June
30, 1997 compared to the same period in 1996 is primarily due to a $2.1 million
adjustment in deferred compensation expense recorded in the three months ended
June 30, 1996. The adjustment was related to the accounting treatment associated
with the decline in the per share market value of variable stock options, as
well as the changing of the vesting periods for these variable options. This
decrease in deferred compensation expense was netted against the selling,
general and administrative expense for this period. After adjusting for the $2.1
million decrease in deferred compensation expense for the three months ended
June 30, 1996, the increases in selling, general and administrative expenses for
the three and six month periods ended June 30, 1997 as compared to the same
periods in 1996 are primarily due to increases in (i) costs associated with
professional services received from public and media relations, financial and
investor consultants and attorneys, and (ii) payroll and facility costs due to
the addition of administrative and corporate personnel. The Company expects
future selling, general and administrative expenses to continue to grow as a
result of the increased support required for research and development
activities, continuing corporate development and professional services,
compensation expense associated with stock options and financial consultants and
general corporate matters as well as the other factors described above. See
"--General" and "--Research and Development."
LOSS IN INVESTMENT IN AFFILIATE. For the three and six month periods ended
June 30, 1997, the Company recorded as expense $240,000 and $472,000,
respectively, in connection with its investment in Ramus Medical Technologies,
Inc. in December 1996. The amounts recorded represent the full amount of the
affiliate's loss for the three and six month periods ended June 30, 1997. The
affiliate's losses from operations are expected to be ongoing throughout 1997
and beyond, and the level of such losses are expected to fluctuate depending on
research and development activities and preclinical and clinical trial progress.
INTEREST INCOME. For the three months ended June 30, 1997 interest income
decreased to $443,000 from $627,000 for the three months ended June 30, 1996.
Interest income for the six months ended June 30, 1997 increased to $1.1 million
from $710,000 for the six months ended June 30, 1996. The decrease in interest
income for the three months ended June 30, 1997 is due to higher cash investment
balances for the three months ended June 30, 1996 related to the Company's
secondary public offering in April 1996. The increase in interest income for the
six months ended June 30, 1997 is due to the proceeds from the secondary
offering generating interest income over a six month period for the first six
months of 1997 as compared to only a two month period for the first six months
of 1996.
The Company does not believe that inflation has had a material impact on
its results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Since inception through June 30, 1997, the Company has accumulated a
deficit of approximately $61.8 million and expects to continue to incur
substantial and increasing operating losses for the next several years. The
Company has financed its operations primarily through private placements of
common and preferred stock, private placements of convertible notes and short
term notes, its initial public offering, Pharmacia & Upjohn's purchase of Common
Stock and a secondary public offering. As of June 30, 1997, the Company had
received proceeds from the sale of equity securities and convertible notes of
approximately $110.7 million. In addition, the Company has financed a
substantial portion of its leasehold improvements and certain equipment through
capital lease obligations, a leasehold improvement loan and a bank line of
credit. The Company has available a $1.0 million bank line of credit which has a
variable rate of interest based on the bank's lending rate (7.35% as of June 30,
1997), which expires on January 31, 1998, and is collateralized by the Company's
cash balances. The credit agreement subjects the Company to certain customary
restrictions, including a prohibition on the payment of dividends. The Company
presently has no outstanding borrowings under the bank line of credit.
In July 1996, the Company's Board of Directors authorized the purchase of
up to 600,000 shares of the Company's Common Stock. During 1996, the Company
repurchased, and subsequently retired, 138,500 shares at a cost of $3.9 million.
Through the first six months of 1997, the Company has repurchased an additional
167,500 shares at a cost of $4.3 million. As of June 30, 1997, all shares
repurchased were retired.
In connection with the licensing agreement with Pharmacia & Upjohn, the
Company has recorded as license income the reimbursement of clinical costs of
$375,000 for the second quarter of 1997, and $600,000 for the six months ended
June 30, 1997. The Company anticipates recording license income for the
reimbursement of clinical costs throughout the remainder of 1997 and beyond.
Although, the level of such income may fluctuate in the future depending on the
amount of clinical costs incurred.
For the first six months of 1997, the Company required cash for operations
of approximately $9.3 million compared to $7.5 million for the same period in
1996. The increase in cash used in operations was primarily due to an increase
in operating activities associated with the continued expansion of preclinical
and clinical testing, the increase in research and development programs,
personnel and general corporate activities. For the first six months of 1997,
the Company required cash for its financing activities of approximately $3.8
million as compared to net cash received from its financing activities of $66.0
million for the same period in 1996. This increase in cash used in financing
activities is primarily related to the repurchase made by the Company of its
Common Stock during the first six months of 1997. The increase in cash provided
by financing activities in 1996 is due to the proceeds received from the
Company's secondary public offering which closed in April 1996.
The Company invested a total of $586,000 in property, plant and equipment
during the first six months of 1997 compared to $665,000 during the same period
in 1996. During 1996, the Company entered into two new lease agreements for
additional facilities. The addition of these new facilities increased the
Company's equipment costs due to the expansion of its laboratories and office
space and the purchase of equipment for this new space. The Company expects to
continue to purchase significant property and equipment during 1997 and beyond
as the Company expands its preclinical, clinical and research and development
activities and continues laboratory and office construction in its new
facilities. Since inception, the Company has entered into capital lease
agreements for approximately $184,000 of equipment, consisting primarily of
laboratory equipment. The Company expects to continue to lease equipment from
time to time as needed.
The Company's capital requirements will depend on numerous factors,
including the progress and magnitude of the Company's research and development
programs and preclinical testing and clinical trials, the time involved in
obtaining regulatory approvals, the cost involved in filing and maintaining
patent claims, technological advances, competitive and market conditions, the
ability of the Company to establish and maintain collaborative arrangements, the
cost of manufacturing scale-up and the cost and effectiveness of
commercialization activities and arrangements.
The Company may require substantial funding to continue its research and
development activities, preclinical and clinical testing and manufacturing,
marketing, sales, distribution and administrative activities. The Company has
raised funds in the past through the public or private sale of securities, and
will contemplate raising funds in the future through public or private
financings, collaborative arrangements or from other sources. The success of
such efforts will depend in large part upon continuing developments in the
Company's preclinical and clinical testing. The Company continues to explore
and, as appropriate, enter into discussions with other companies regarding the
potential for equity investment, collaborative arrangements, license agreements
or development or other funding programs with the Company in exchange for
manufacturing, marketing, distribution or other rights to products developed by
the Company. However, there can be no assurance that discussions with other
companies will result in any investments, collaborative arrangements, agreements
or funding, or that the necessary additional financing through debt or equity
financing will be available to the Company on acceptable terms, if at all.
Further, there can be no assurance that any arrangements resulting from these
discussions will successfully reduce the Company's funding requirements. If
additional funding is not available to the Company when needed, the Company will
be required to scale back its research and development programs, preclinical and
clinical testing and administrative activities and the Company's business and
financial results and condition would be materially adversely affected.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 21, 1997, the Company held its Annual Meeting of Stockholders. The
following individuals were elected to the Board of Directors:
Votes Votes
For Withheld
--------------- ---------------
Michael D. Farney ........... 8,037,290 1,307,220
Charles T. Foscue ........... 9,337,210 7,300
Gary S. Kledzik, Ph.D. ...... 9,337,210 7,300
David E. Mai ................ 9,337,210 7,300
Donald K. McGhan ............ 8,902,210 442,300
Raul E. Perez, M.D. ......... 9,337,210 7,300
The following proposals were approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstained Non-Votes
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Proposal to amend the PDT, Inc. 1996
Stock Compensation Plan to modify the
grant provisions and increase the number
of shares reserved under the plan. ....... 8,192,027 467,727 16,949 667,807
2. Proposal to ratify the selection of the
Company's independent auditors. .......... 9,336,526 5,550 2,434 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index on page 14.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
PDT, INC.
Date: August 12, 1997 By: /S/ JOHN M. PHILPOTT
--------------------
John M. Philpott
Chief Financial Officer
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
INCORPORATING
EXHIBIT REFERENCE
NUMBER DESCRIPTION (IF APPLICABLE)
- ------- ----------- ---------------
<S> <C>
3.1 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant [C][3.11]
filed with the Delaware Secretary of State on July 24, 1995.
3.2 Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary [B][3.1]
of State on December 14, 1994.
3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.2]
the Delaware Secretary of State on March 17, 1994.
3.4 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.3]
the Delaware Secretary of State on October 7, 1992.
3.5 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.4]
the Delaware Secretary of State on November 21, 1991.
3.6 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.5]
the Delaware Secretary of State on September 27, 1991.
3.7 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.6]
the Delaware Secretary of State on December 20, 1989.
3.8 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.7]
the Delaware Secretary of State on August 11, 1989.
3.9 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.8]
the Delaware Secretary of State on July 13, 1989.
3.10 Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State [A][3.9]
on June 16, 1989.
3.11 Amended and Restated Bylaws of the Registrant.
4.1 Specimen Certificate of Common Stock. [B][4.1]
4.2 Form of Convertible Promissory Note. [A][4.3]
4.3 Form of Indenture. [A][4.4]
4.4 Special Registration Rights Undertaking. [A][4.5]
4.5 Undertaking Agreement dated August 31, 1994. [A][4.6]
4.6 Letter Agreement dated March 10, 1994. [A][4.7]
4.7 Form of $10,000,000 Common Stock and Warrants Offering Investment Agreement. [A][4.8]
10.1 Amended and restated 1996 Stock Compensation Plan.* [E]
10.2 PDT, Inc. 401(k)-Employee Stock Ownership Plan.* [F][4.1]
11.1 Statement regarding computation of net loss per share.
27.1 Financial Data Schedule.
- -------------------
[A] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Registration
Statement on Form S-1 (File No. 33-87138).
[B] Incorporated by reference from the exhibit referred to in brackets contained in Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (File No. 33-87138).
[C] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Form 10-Q
for the quarter ended June 30, 1995, as amended on Form 10-Q/A dated December 6, 1995 (File No.0-25544).
[D] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Form 10-Q
for the quarter ended September 30, 1996 (File No. 0-25544).
[E] Incorporated by reference from the Registrant's 1996 Definitive Proxy Statement filed April 24, 1997.
[F] Incorporated by reference from the exhibit referred to in brackets contained in the Registrant's Registration
Statement on Form S-8 filed June 17, 1997 (File No. 333-29413).
* Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE>
EXHIBIT 3.11
AMENDED AND RESTATED
BYLAWS OF
PDT, INC.,
A DELAWARE CORPORATION
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS.
All meetings of the shareholders of this corporation ("Corporation")
shall be held at the principal executive office of the Corporation in the
State of Delaware, or such other place within or without the State as may
be designated from time to time by the Board of Directors or as may be
consented to in writing by all of the persons entitled to vote thereat and
not present at the meeting.
Section 2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held within one
hundred fifty (150) days after the closing of the accounting year, at which
time the shareholders shall elect a Board of Directors, consider reports of
the affairs of the Corporation, and transact such other business as may
properly be brought before the meeting. In the event the annual meeting of
shareholders is not held within the time above specified, the Board of
Directors shall cause a meeting in lieu thereof to be held as soon
thereafter as is convenient, and any business transacted or election held
at such meeting shall be as valid as if the meeting had been held on the
date above specified.
Section 3. SPECIAL MEETINGS.
Special meetings of the shareholders, for the purpose of taking any
action permitted to be taken by the shareholders under the Delaware General
Corporation Law and the Certificate of Incorporation, may be called at any
time by the Chairman of the Board, the President, the Board of Directors,
or by any two or more members thereof, or by one or more shareholders
holding not less than ten percent (10%) of the voting power of the
Corporation.
Section 4. NOTICE OF MEETINGS.
Notice of meetings, annual or special, shall be given in writing to
each shareholder entitled to vote at that meeting by the Secretary or
Assistant Secretary, or, if there be no such officers, by the Chairman of
the Board or the President, or in the case of neglect or refusal, by any
person or persons entitled to call a meeting, not less than ten (10) nor
more than sixty (60) days before such meeting.
Such written notice shall be given either personally or by other means
of written communication, addressed to the shareholder at the address of
the shareholder appearing on the books of the Corporation or given by the
shareholder to the Corporation for the purpose of notice; or if no such
address appears or is given, at the place where the principal office of the
Corporation is located or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office
is located. The giving of notice as provided by these Bylaws may be omitted
only to the extent and in the manner expressly permitted by the Delaware
General Corporation Law.
Section 5. NOTICE OF ADJOURNMENT.
When a meeting is adjourned for more than forty-five (45) days or if
after the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given as in the case of an
original meeting. Except as stated above, it shall not be necessary to give
any notice of the adjourned meeting, other than by announcement of the time
and place thereof at the meeting at which such adjournment is taken, and
the Corporation may transact at the adjourned meeting any business which
might have been transacted at the original meeting.
Section 6. CONTENTS OF NOTICE.
Notice of any meeting of shareholders shall specify:
a. The place, the date and the time of the meeting;
b. Those matters which the Board, at the time of the mailing of the
notice, intends to present for action by the shareholders;
c. If directors are to be elected, the names of nominees intended at
the time of the notice to be presented by management for election;
d. The general nature of any proposal to take action with respect to
the approval of (i) a contract or other transaction with an interested
director, (ii) an amendment of the Certificate of Incorporation, (iii) the
reorganization of the Corporation within the meaning of the Delaware
General Corporation Law, (iv) the voluntary dissolution of the Corporation,
or (v) a distribution in dissolution other than in accordance with the
rights of any outstanding preferred shares; and
e. Such other matters, if any, as may be expressly required by
statute.
Section 7. CONSENT TO SHAREHOLDER'S MEETING.
The transactions of any meeting of shareholders, however called and
noticed, shall be valid as those had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of notice
or a consent to the holding of the meeting or an approval of the minutes of
the meeting. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting. A
waiver of notice or a consent to the holding of any meeting of shareholders
need not specify the business transacted at or the purpose of any regular
or special meeting, other than any proposal approved or to be approved at
such meeting, the general nature of which was required by Section 6.d. of
these Bylaws to be stated in the notice of the meeting.
Section 8. ACTION WITHOUT A MEETING.
Unless otherwise provided in the Certificate of Incorporation, any
action which may be taken at any annual or special meeting of the
shareholders, other than the election of directors, may be taken without a
meeting and without prior notice, if a consent in writing, setting forth
the action so taken shall be signed by the holders of outstanding shares
having not less than the minimum number of votes necessary to authorize or
take such action at a meeting at which all shareholders entitled to vote
were present and voted.
Unless the consents of all shareholders entitled to vote have been
solicited in writing, prompt notice shall be given of the taking of any
corporate action approved by shareholders without a meeting by less than
unanimous written consent to those shareholders entitled to vote who have
not consented in writing, and, as to any action with respect to (i) a
contract or other transaction with an interested director, (ii) the
indemnification of any present or former agent of the Corporation within
the meaning of Section 145 of the Delaware General Corporation Law, (iii)
any reorganization within the meaning of the Delaware General Corporation
Law, or (iv) a distribution in dissolution other than in accordance with
the rights of any outstanding preferred shares, such notice shall be given
at least ten (10) days before the consummation of such action.
A director may be elected at any time to fill a vacancy not filled by
the Board by the written consent of persons holding a majority of the
outstanding shares entitled to vote for the election of directors, and any
required notice of any such election shall promptly be given as provided
above. Directors may not otherwise be elected without a meeting unless a
consent in writing, setting forth the action so taken, is signed by all of
the persons who would be entitled to vote for the election of directors.
Section 9. QUORUM; ADJOURNMENT.
The holders of a majority of the shares entitled to vote, represented
in person or by proxy, shall be required and shall constitute a quorum at
all meetings of the shareholders for the transaction of business, except as
otherwise provided by the Certificate of Incorporation. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required
to constitute a quorum. If a quorum shall not be present or represented at
any meeting of the shareholders, the meeting may be adjourned from time to
time by majority vote of the shares entitled to vote at the meeting who are
present in person or represented by proxy, until the requisite number of
voting shares shall be present.
Section 10. VOTING RIGHTS; CUMULATIVE VOTING.
Subject to the provisions of Sections 212 through 218, inclusive, of
the Delaware General Corporation Law, only persons in whose names shares
entitled to vote stand on the stock records of the Corporation on the
record date shall be entitled to vote at meetings of the shareholders.
Every shareholder entitled to vote shall be entitled to one vote for each
of such shares, and the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on any matter shall be the
act of the shareholders, unless the vote of a greater number or voting by
classes is required by the Delaware General Corporation Law or by the
Certificate of Incorporation.
Every shareholder entitled to vote at any election of directors shall
have the right to cumulate his votes to the extent and in the manner
provided by Section 214 of the Delaware General Corporation Law.
Section ll. PROXIES.
Every shareholder entitled to vote or to execute consents may do so
either in person or by written proxy executed in accordance with the
provisions of the Delaware General Corporation Law and filed with the
Secretary or Assistant Secretary of the Corporation.
Section 12. INSPECTORS OF ELECTION.
Before any meeting of shareholders, the Board of Directors may appoint
any persons other than nominees for office to act as Inspectors of Election
at such meeting or any adjournment thereof. If no Inspectors of Election
are appointed, or if an appointment is vacated by an Inspector who fails to
appear or fails or refuses to act, the Chairman of any such meeting may,
and on the request of any shareholder or his proxy shall, make such
appointment or fill such vacancy at the meeting.
ARTICLE II
DIRECTORS
Section 1. POWERS.
Subject to the limitations of the Certificate of Incorporation, the
Bylaws, and of the Delaware General Corporation Law as to action to be
authorized or approved by the shareholders, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be controlled by, the Board of Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.
The authorized number of directors of this Corporation will be not
less than five (5) nor more than nine (9), and the exact number of
directors will be six (6) until changed, within the limits specified above,
by a resolution amending such exact number, duly adopted by the Board of
Directors or by the stockholders. Subject to the provisions of the
Certificate of Incorporation, the minimum and maximum number of directors
may be changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the Certificate of
Incorporation or by an amendment to this ByLaw duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled
to vote; provided, however, that no decrease will shorten the term of any
incumbent director unless such director is specifically removed pursuant to
Section 5 of this Article II of these ByLaws at the time of such decrease.
(Section 2 was amended in its entirety at the July 17, 1996 Annual Meeting
of Stockholders, and subsequently by Written Consent by the Board of
Directors effective May 21, 1997.)
Section 3. ELECTION OF DIRECTORS.
The directors shall be elected by ballot at the annual meeting of the
shareholders to hold office until the next annual meeting and until their
successors are elected and qualified. Their term of office shall begin
immediately after election.
Section 4. VACANCIES.
A vacancy in the Board of Directors shall be deemed to exist in the
case of the death, resignation or removal of any director, if a director
has been declared of unsound mind by order of Court or convicted of a
felony, if the authorized number of directors is increased, or if the
shareholders shall fail, either at a meeting at which an increase in the
number of directors is authorized, or at an adjournment thereof, or at any
other time, to elect the full number of authorized directors.
Vacancies in the Board of Directors, except for a vacancy created by
the removal of a director, may be filled by a majority of the remaining
directors, and each director so elected shall hold office until his
successor is elected at an annual or special meeting of the shareholders. A
vacancy created by the removal of a director may be filled only by a vote
of the majority of the shares entitled to vote at a duly held meeting of
the shareholders, or by the written consent of the holders of a majority of
the outstanding shares.
The shareholders may at any time elect a director or directors to fill
any vacancies not filled by the directors.
If any director tenders his resignation to the Board of Directors to
take effect at a future time, the Board or the shareholders shall have the
power to elect a successor to take office at such time as the resignation
shall become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of
office.
Section 5. REMOVAL OF DIRECTORS.
The entire Board of Directors, or any individual director, may be
removed from office in the manner provided by the Delaware General
Corporation Law.
Section 6. PLACE OF MEETING.
Meetings of the Board of Directors shall be held at the principal
executive office of the Corporation, or as designated from time to time by
resolution of the Board of Directors or written consent of all of the
members of the Board. Any meeting shall be valid wherever held if held with
the written consent of all members of the Board of Directors, given either
before or after the meeting and filed with the Secretary or Assistant
Secretary of the Corporation.
Section 7. ANNUAL MEETING.
A regular annual meeting of the Board of Directors shall be held
without notice at the place of the annual meeting of shareholders
immediately following the adjournment thereof, for the purpose of
organization, election of officers, and the transaction of such other
business as may properly come before the meeting.
Section 8. OTHER REGULAR MEETINGS.
Other regular meetings of the Board of Directors shall be held on the
last Thursday of each calendar quarter.
Section 9. SPECIAL MEETINGS; NOTICES.
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the Chairman of the Board, the President, any
Vice-President, the Secretary, or by any two (2) directors.
Written notice of the time and place of special meetings shall be
delivered or communicated personally to each director by telephone, or by
telecopy or mail, charges prepaid, addressed to him at his address as it is
shown upon the records of the Corporation, or if such address is not
readily ascertainable, at the place in which the meetings of the directors
are regularly held. If such notice is mailed or telecopied, it shall be
deposited in the United States mail or delivered at least forty-eight (48)
hours prior to the time of the holding of the meeting. In case such notice
is delivered personally or by telephone, it shall be so delivered at least
twenty-four (24) hours prior to the time of holding the meeting. Such
mailing, telecopying or delivery, personally or by telephone, as above
provided shall be due, legal and personal notice to such director.
Section 10. WAIVER OF NOTICE.
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, are as valid as though had at a
meeting regularly called and noticed if all the directors are present and
sign a consent to the holding of the meeting on the records of the meeting,
or if a majority of the directors are present and each of those not
present, either before or after the meeting, signs a written waiver of
notice, or a consent to holding the meeting, or an approval of the minutes
of the meeting. All such waivers, consents, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section ll. ACTION OF DIRECTORS WITHOUT MEETING.
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, if all members of the Board shall
individually or collectively consent in writing to such action. Such
written consent or consents shall be filed with the minutes of the
proceedings of the Board, and shall have the same force and effect as a
unanimous vote of the directors.
Section 12. ACTION AT A MEETING; QUORUM.
A majority of the authorized number of directors shall be necessary to
constitute a quorum for the transaction of business, and the action of a
majority of the directors present at a meeting duly held at which a quorum
is present, when duly assembled, is valid as a corporate act unless a
greater number is required by the Certificate of Incorporation, these
Bylaws, or the Delaware General Corporation Law. Directors may participate
in a meeting through the use of conference telephone or similar
communications equipment as long as all members participating in the
meeting can hear one another, and such participation shall constitute the
presence in person at the meeting.
Section 13. ADJOURNMENT.
A majority of the directors present, whether or not a quorum, may
adjourn from time to time by fixing a new time and place prior to taking
adjournment, but if any meeting is adjourned for more than twenty-four (24)
hours, notice of any adjournment to another time or place shall be given
prior to the time of the adjourned meeting to any directors not present at
the time the adjournment was taken.
Section 14. COMMITTEES.
The Board of Directors may, by resolutions adopted by a majority of
the authorized number of directors, establish one or more committees,
including an Executive Committee, each consisting of two or more directors,
to serve at the pleasure of the Board. The Board of Directors may delegate
to any such committee any of the powers and authority of the Board of
Directors in the business and affairs of the Corporation, except those
powers specifically reserved to the Board of Directors by the provisions of
Section 141 of the Delaware General Corporation Law. The Board shall
prescribe the manner in which the proceedings of the Executive Committee or
any other Committee shall be conducted, and may designate one or more
alternate directors to replace any absent committee members at any meeting
of the Committee.
ARTICLE III
OFFICERS
Section l. OFFICERS.
The officers of the Corporation shall be elected by and shall hold
office at the pleasure of the Board of Directors. These officers shall
include a President, one or more Vice Presidents, a Secretary and a Chief
Financial Officer, and may include a Chairman of the Board of Directors.
Section 2. ELECTION.
After their election, the Board of Directors shall meet and organize
by electing a President, one or more Vice Presidents, a Secretary and a
Chief Financial Officer, who may be, but need not be, members of the Board
of Directors, and such additional officers provided by these Bylaws as the
Board of Directors shall determine to be appropriate. Any two or more
offices may be held by the same person.
Section 3. COMPENSATION AND TENURE OF OFFICE.
The compensation and tenure of office of all of the officers of the
Corporation shall be fixed by the Board of Directors.
Section 4. REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by a
majority of the directors at the time in office, at any regular or special
meeting of the Board, or except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors, subject in each case, however, to any
rights of an officer under any contract of employment.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the President, or to the Secretary or an Assistant
Secretary of the Corporation without prejudice, however, to any rights of
the Corporation under any contract to which such officer is a party.
Any such resignation shall take effect at the date of receipt of such
notice or at any later time specified in the notice; and unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. VACANCIES.
Any vacancy in an office occurring because of death, resignation,
removal, disqualification or any other cause may be filled by the Board of
Directors at any regular or special meeting of the Board, or in such manner
as may otherwise be prescribed in the Bylaws for appointment to such
office.
Section 6. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if there be one, shall, when present,
preside at all meetings of the shareholders and of the Board of Directors,
and shall have such other powers and duties as from time to time shall be
prescribed by the Board of Directors.
Section 7. PRESIDENT.
The President shall be the general manager of the Corporation and,
subject to the control of the Board of Directors, shall be chief executive
officer of the Corporation and shall have general supervision, direction
and control of the business and affairs of the Corporation. If the
Corporation has no Chairman of the Board, the President shall also have the
duties prescribed above for the Chairman of the Board.
Section 8. VICE PRESIDENTS.
In the absence or the disability of the President, the Vice
Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the directors, or if no
such designation is made by the Board of Directors, the Vice President
designated by the President, shall perform the duties and exercise the
powers of the President, and shall perform such other duties and have such
other powers as the Board of Directors shall prescribe.
Section 9. SECRETARY.
The Secretary shall keep, or cause to be kept, a book of Minutes at
the principal executive office or such other place as the Board of
Directors may order, of all the proceedings of its shareholders and the
Board of Directors and Committees of the Board, with the time and place of
holding of meetings, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at
directors' meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings of these meetings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent, a
share register or a duplicate share register, showing the names of the
shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
Bylaws or by law to be given; he shall keep the seal of the Corporation and
affix the seal to all documents requiring a seal; and he shall have such
other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
Section 10. ASSISTANT SECRETARY.
The Assistant Secretary, if there is one, shall have all the same
rights, duties, powers and privileges as the Secretary and may act in his
place and stead whenever necessary or desirable.
Section ll. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. The books of account shall at all reasonable times be open to
inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the President and directors, whenever they so
request, an account of all his transactions as Chief Financial Officer and
of the financial condition of the Corporation, and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
Section 12. SUBORDINATE OFFICERS.
Subordinate Officers, including but not limited to, Assistant
Secretaries, Treasurers and Assistant Treasurers, or agents, as the
business of the Corporation may require, may from time to time be appointed
by the Board of Directors, the President, or by any officer empowered to do
so by the Board of Directors, and shall have such authority and shall
perform such duties as are provided in the Bylaws or as the Board of
Directors may from time to time determine.
ARTICLE IV
CORPORATE RECORDS, INSPECTION, VOTING SHARES
IN NAME OF CORPORATION
Section l. RECORDS.
The Corporation shall maintain adequate and correct books and records
of account of its business and properties. All of such accounts, books and
records shall be kept at its principal business office, or at such other
location as may be fixed by the Board of Directors from time to time.
Section 2. INSPECTION.
The accounting books and records and Minutes of the proceedings of the
shareholders and the Board of Directors and its Committees shall be open to
inspection by the shareholders from time to time and in the manner provided
in Section 220 of the Delaware General Corporation Law, and every director
shall have the right to inspect and copy all books, records and documents
of the Corporation, and to inspect its properties, in the manner provided
by Section 220 of the Delaware General Corporation Law.
Section 3. VOTING SHARES IN NAME OF CORPORATION.
Shares standing in the name of this Corporation may be voted or
represented and all rights incident to those shares may be exercised on
behalf of the Corporation by the President, or if he is unable or refuses
to act, by a Vice President or by such other person as the Board of
Directors may determine.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section l. CERTIFICATES FOR SHARES.
Every holder of shares in the Corporation shall be entitled to have a
certificate, in such form and device as the Board of Directors may
designate, certifying the number of shares and the classes or series of
shares owned by the shareholder, and containing a statement setting forth
the office or agency of the Corporation from which the shareholder may
obtain, upon request and without charge, a copy of the statement of any
rights, preferences, privileges, and restrictions granted to or imposed
upon each class or series of shares authorized to be issued and upon the
holders of those shares, and any other legend or statement as may be
required under the Delaware General Corporation Law and federal and state
corporate securities laws.
Every certificate for shares shall be signed in the name of the
Corporation by the President or Vice President and the Secretary or an
Assistant Secretary. Any signature on the certificate may be by facsimile,
provided that at least one signature, which may but need not be that of the
Corporation's registrar or transfer agent, if any, shall be manually
signed.
Section 2. TRANSFER ON THE BOOKS.
Upon surrender to the Secretary or Assistant Secretary or to the
transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES.
A new certificate may be issued without the surrender and cancellation
of an old certificate that is lost, apparently destroyed or wrongfully
taken when: (a) the request for the issuance of a new certificate is made
within a reasonable time after the owner of the old certificate has notice
of its loss, destruction or theft; and (b) such request is received by the
Corporation prior to its receipt of notice that the old certificate has
been acquired by a bona fide purchaser; and (c) the owner of the old
certificate gives an indemnity bond or other adequate security sufficient
in the judgment of the Corporation to indemnify it against any claim,
expense or liability resulting from the issuance of a new certificate. In
the event of the issuance of a new certificate, the rights and liabilities
of the Corporation, and of the holders of the old and new certificates,
shall be governed by the provisions of the Delaware General Corporation
Law.
Section 4. TRANSFER AGENTS AND REGISTRARS.
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, which shall be banks or trust
companies, either domestic or foreign, at such times and places as the
requirements of the Corporation may necessitate and the Board of Directors
may designate.
Section 5. RECORD DATE.
The Board of Directors may fix, in advance, a record date for the
purpose of determining shareholders entitled to notice of and to vote at
any meeting of shareholders, to consent to corporate action in writing
without a meeting, to receive any report, to receive any dividend or other
distribution or allotment of any right or to exercise rights with respect
to any change, conversion or exchange of shares. The record date so fixed
shall not be more than sixty (60) days prior to any event for the purpose
for which it is fixed, and shall not be less than ten (10) days prior to
the date of any meeting of the shareholders. If no such record date is
fixed by the Board of Directors, then the record date shall be that date
prescribed by Section 213 of the Delaware General Corporation Law.
ARTICLE VI
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the Corporation, the date of its incorporation, and the
words "INCORPORATED DELAWARE".
ARTICLE VII
AMENDMENTS
Section l. BY SHAREHOLDERS.
The Bylaws may be repealed or amended, or new Bylaws may be adopted,
by the affirmative vote of a majority of the outstanding shares entitled to
vote or by the written consent of shareholders entitled to vote such
shares, except as otherwise provided by the Delaware General Corporation
Law or by the Certificate of Incorporation.
Section 2. BY DIRECTORS.
Subject to the right of shareholders as provided in Section l of this
Article VII to adopt, amend or repeal Bylaws, the Board of Directors may
adopt, amend or repeal Bylaws; provided, however, that no Bylaw or
amendment changing the number of directors of the Corporation shall be
adopted other than in the manner provided by Section 2 of Article II of
these Bylaws.
Section 3. RECORDS OF AMENDMENTS.
Any amendment or new Bylaw adopted by the shareholders or Board of
Directors shall be copied in the appropriate place in the Minute book with
the original Bylaws, and the repeal of any Bylaw shall be entered on the
original Bylaws together with the date and manner of such repeal. The
original or a copy of the Bylaws as amended to date shall be open to
inspection by the shareholders at the Corporation's principal executive
office at all reasonable times during office hours.
ARTICLE VIII
WAIVER OF ANNUAL REPORT
The requirement that this Corporation send an annual report to its
shareholders is hereby expressly waived.
ARTICLE IX
INDEMNIFICATION OF OFFICERS, DIRECTORS, AND AGENTS
Section 1. DEFINITIONS.
For the purposes of this Article IX the following definitions shall
apply:
a. "Agent" means any person who (a) is or was a director, officer,
employee or other agent of the Corporation, or (b) is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another foreign or domestic corporation, joint venture, trust or other
enterprise, or (c) was a director, officer, employee or agent of a foreign
or domestic corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.
b. "Proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative.
c. "Expenses" includes without limitation attorneys' fees and any
expenses of establishing a right to indemnification under Section 5 of this
Article IX below.
d. "Independent Legal Counsel" means an attorney mutually agreeable to
the Corporation and the agent seeking indemnification, with such attorney
to be designated within ten (10) days after notice by one party to the
other. If the Corporation and the agent seeking indemnity cannot agree upon
the selection of such attorney within such ten (10) day period, an attorney
shall be selected by the Corporation from among five (5) attorneys
designated in a writing by the agent delivered to the Corporation within
five (5) days after the end of the ten (10) day period; provided, however,
that the attorneys so designated have a minimum of ten (10) years
experience in corporate law, and are each full partners (or the equivalent)
in a law firm with at least five (5) attorneys. If the Corporation and the
agent cannot agree upon the selection of the attorney, and if the agent
fails to designate his selection of five (5) attorneys within the five (5)
day period, the Corporation alone shall choose the attorney.
Section 2. PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in the right of the Corporation to procure a judgment in its favor) by
reason of the fact that such person is or was an agent of the Corporation
against expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such person
acted in good faith and in a manner such person reasonably believed to be
in the best interest of the Corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person
was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which the person reasonably believed to be in
the best interests of the Corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
Section 3. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person is or was an agent of the
Corporation, against expenses actually and reasonably incurred by such
person in connection with the defense or settlement of such action if such
person acted in good faith, in a manner such person reasonably believed to
be in the best interest of the Corporation and its shareholders.
Section 4. DETERMINATION OF RIGHT TO INDEMNIFICATION.
To the extent that a person who is or was an agent of the Corporation
has been successful on the merits in defense of any proceeding referred to
in Section 2 or 3 of this Article IX above or in the defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
actually and reasonably incurred by such person in connection therewith.
Except as provided in the first paragraph of this Section 4 above, any
indemnification under Section 2 or 3 of this Article IX above shall be made
by the Corporation only if authorized in the specific case, upon a
determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct
set forth in Section 2 or 3 of this Article IX above, by any of the
following: (a) a majority vote of a quorum consisting of directors who are
not parties to such action or proceeding; (b) if such a quorum of directors
is not obtainable, by independent legal counsel in a written opinion; (c)
approval or ratification by the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a
majority of the required quorum); (d) written consent of the shareholders
under Section 228 of the Delaware General Corporation Law; (e) the
affirmative vote or written consent of such greater proportion (including
all) of the shares of any class or series as may be provided in the
Certificate of Incorporation or in the Delaware General Corporation Law,
for all or any specified shareholder action; or (f) the court in which such
proceeding is or was pending upon application made by the Corporation or
the agent or the attorney or other person rendering service in connection
with the defense, whether or not such application by the agent, attorney or
other person is opposed by the Corporation.
The shares owned by the person to be indemnified shall not be entitled
to vote on any written consent or affirmative vote set forth in the second
paragraph of Section 4 of this Article IX above.
Section 5. INDEMNITY FOR EXPENSES OF ESTABLISHING RIGHT TO INDEMNIFICATION.
To the extent that a person who is or was an agent of the Corporation
has been successful on the merits in defense of any proceeding referred to
in Section 2 or 3 of this Article IX above, or in defense of any claim,
issue or matter therein, such person shall also be indemnified against
expenses of establishing a right to indemnification actually and reasonably
incurred by such person in connection therewith.
If authorized in the specific case, upon a determination that
indemnification of such person is proper in the circumstances because such
person has met the applicable standard of conduct set forth in Section 2 or
3 of this Article IX above, by any of the following: (a) approval or
ratification by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of
the required quorum); (b) written consent of the shareholders under Section
228 of the Delaware General Corporation Law, or (c) the affirmative vote or
written consent of such greater proportion (including all) of the shares of
any class or series as may be provided in the Certificate of Incorporation
or in the Delaware General Corporation Law, for all or any specified
shareholder action; such person shall also be indemnified against any
expenses of establishing a right to indemnification actually and reasonably
incurred therewith.
The shares owned by the person to be indemnified shall not be entitled
to vote on any written consent or affirmative vote set forth in the second
paragraph of Section 5 of this Article IX above.
Section 6. PROCEDURE FOR INDEMNIFICATION.
Any indemnification under Section 2, 3, or 5 of this Article IX above,
or advance under Section 7 of this Article IX below, shall be made
promptly, and in any event within sixty (60) days, upon the written request
of the agent. The right to indemnification or advances as granted by this
Article IX shall be enforceable by the agent in any court of competent
jurisdiction, if the Corporation denies such request in whole or in part or
if no disposition thereof is made within sixty (60) days. It shall be a
defense to any such action that the agent has not met the standard of
conduct set forth in Section 2, 3, or 5 of this Article IX above, or
regarding a claim for advances the agent has not delivered the required
undertaking under Section 7 of this Article IX below, but the burden of
proving the defense is on the Corporation.
Section 7. ADVANCES.
Expenses incurred in defending any proceeding shall be advanced by the
Corporation prior to the final disposition of such proceeding upon receipt
of any undertaking by or on behalf of the person claiming a right to be
indemnified under this Article IX to repay such amount if it shall be
determined ultimately that the agent is not entitled to be indemnified as
authorized in this Article IX.
Section 8. OTHER RIGHTS AND CONTINUATION OF RIGHTS TO INDEMNIFICATION.
The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, approval of shareholders or
disinterested directors or otherwise, both as to action in an official
capacity and as to action in any other capacity while holding such office,
to the extent such additional rights to indemnification are authorized in
the Certificate of Incorporation. The rights to indemnity hereunder shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors, and
administrators of the person. Nothing contained in this Article IX shall
affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
Section 9. INSURANCE.
This Corporation may purchase and maintain insurance on behalf of any
agent of the Corporation against any liability asserted or incurred by the
agent in such capacity or arising out of the agent's status as such whether
or not the Corporation would have the power to indemnify the agent against
such liability under the provisions of this Article IX. The fact that the
Corporation owns all or a portion of the shares of the company issuing a
policy of insurance shall not render this Section 9 inapplicable if either
of the following conditions are satisfied: (a) if authorized in the
Certificate of Incorporation, any policy issued is limited to the extent
not in conflict with the Delaware General Corporation Law, or (b) the
company issuing the insurance policy is organized, licensed, and operated
in a manner that complies with the insurance laws and regulations
applicable to its jurisdiction of organization, the company issuing the
policy provides procedures for processing claims that do not permit that
company to be subject to the direct control of the Corporation that
purchased that policy, and the policy issued provides for some manner of
risk sharing between the issuer and purchaser or the policy, on one hand,
and some unaffiliated person or persons, on the other, such as by providing
that a portion of the coverage furnished will be obtained from some
unaffiliated insurer or reinsurer.
Section 10. SAVINGS CLAUSE.
If this Article IX or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each person as to any expenses, judgments, fines,
settlements and other amounts incurred by such person in connection with
any proceeding, to the fullest extent permissible under applicable law.
Section 11. SUBSEQUENT AMENDMENT.
If the Delaware General Corporation Law or any other applicable law is
amended after approval by the shareholders of this Article IX to further
expand the indemnification permitted to directors, officers and agents of
the Corporation, then the Corporation shall indemnify such person to the
fullest extent permissible under the Delaware General Corporation Law or
other applicable law, as so amended.
Section 12. CONTRACT.
The rights to indemnification conferred in this Article shall be
deemed to be a contract between the Corporation and each person who serves
in the capacities described above at any time while this Article is in
effect. Any repeal or modification of this Article shall not in any way
diminish any rights to indemnification of such person or the obligations of
the Corporation arising hereunder.
Section 13. INDEMNITY AGREEMENTS.
The Corporation may from time to time enter into indemnity agreements
with the persons who are members of its Board of Directors and with such
officers or other agents of the Corporation as the Board may designate,
such indemnity agreements to provide in substance that the Corporation will
indemnify such persons to the fullest extent permitted by the provisions of
this Articles IX and the Certificate of Incorporation.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
COMPUTATION OF NET LOSS PER SHARE
(Unaudited)
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
---------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Primary
Net loss ................................. $ (5,736,000) $ (1,682,000) $ (11,173,000) $ (8,484,000)
=============== ================ ============== ==============
Weighted average common shares outstanding 12,365,451 11,872,255 12,368,328 11,148,338
--------------- ---------------- -------------- --------------
Net loss per share ....................... $ (0.46) $ (0.14) $ (0.90) $ (0.76)
=============== ================ ============== ==============
Fully diluted
Net loss ................................. $ (5,736,000) $ (1,682,000) $ 11,173,000) $ (8,484,000)
=============== ================ ============== ==============
Weighted average common shares outstanding 12,365,451 11,872,255 12,368,328 11,148,338
--------------- ---------------- -------------- --------------
Net loss per share ....................... $ (0.46) $ (0.14) $ (0.90) $ (0.76)
=============== ================ ============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1997, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Jun-30-1997
<CASH> 17,570
<SECURITIES> 21,327
<RECEIVABLES> 586
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,263
<PP&E> 5,257
<DEPRECIATION> (2,247)
<TOTAL-ASSETS> 45,432
<CURRENT-LIABILITIES> 2,979
<BONDS> 2
0
0
<COMMON> 105,252
<OTHER-SE> (62,801)
<TOTAL-LIABILITY-AND-EQUITY> 45,432
<SALES> 0
<TOTAL-REVENUES> 724
<CGS> 0
<TOTAL-COSTS> 12,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (11,173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,173)
<EPS-PRIMARY> (0.90)
<EPS-DILUTED> (0.90)
</TABLE>
